Clean up the books or risk funding cuts, budget chair warns Pentagon

If the Pentagon can't do a better job of managing its finances Congress may have to consider withholding some of the additional funds the military is slated to receive under a new budget deal, the Republican chairman of the Senate Budget Committee warned Wednesday.

Sen. Mike Enzi of Wyoming was responding to a recent report in POLITICO about an initial audit of the Pentagon's massive logistics arm that concluded it could not account for hundreds of millions of dollars.

The independent audit of the Defense Logistics Agency, which was completed in December for the Pentagon's Inspector General by accounting firm Ernst & Young, found major gaps at the agency that acquires goods and services for the military and has an annual budget of about $40 billion.

"The independent auditors cited an inability to ensure the accuracy of financial statements related to hundreds of millions of dollars of construction-in-progress contracts and internal software," Enzi wrote. "They also noted problems reconciling DLA's ledger with that of the Treasury Department weaknesses in the agency's IT software, and a general lack of oversight mechanisms."

The DLA, which has long had a reputation for weak financial controls, is the largest Pentagon agency to undergo an audit. It is seen as a test case for a broader effort to scrub the books across the Department of Defense, which has an estimated $2.2 trillion in assets but has never passed an audit.

In his letter to Mattis, Enzi is seeking more information how the Pentagon is applying the lessons of the DLA audit and details on its plans to spend an estimated $900 million to conduct a full audit of the Pentagon in the coming years.

Enzi requested that Mattis respond to his concerns by March 15.

“It is important for Congress to better understand how DOD is translating audit findings into changes in its business practices,” he wrote.

Enzi's warnings come just weeks after Congress and President Donald Trump agreed to a two-year budget deal that is set to deliver a huge increase in spending to the Department of Defense, beginning with an extra $68 billion through October of this year.

"As an accountant, I appreciate the complexities of conducting a consolidated audit of the DoD," Enzi wrote. "While this initiative may be far overdue, I recognize it will take some time for the Pentagon to fundamentally improve its financial accounting systems. We cannot, however, be dissuaded by the long-term nature of the task."

An aide to the senator, who is one of the leading fiscal conservatives in Congress, said the chairman plans to make oversight of the Pentagon audit effort a top priority for the budget panel this year.